Apple surrendered the title of the world’s most valuable company to Exxon Mobil after concern over slowing growth drove the shares to the biggest loss in the Standard & Poor’s 500 Index.
Apple’s 12-month reign as the No. 1 stock ended after the shares slumped 18 per cent this year, worse than any other companies in the benchmark gauge for US equities. The decline reduced its market capitalization to $US412 billion, below Exxon Mobil’s $US417 billion.
The switch in rankings reflected fading confidence in Apple, whose 15 years of transformation from a near-bankrupt personal-computer maker to a technology leader dominating the smartphone and tablet market helped it become the most valuable US company ever in 2012. Apple shares have fallen by 37 per cent from a record in September amid concern that mounting costs and competition may curtail growth.
“You have one company that had pretty high expectations for it for the future and you have Exxon that continues to chip away slow and steady,” Jason Cooper, who helps oversee $US2.5 billion in South Bend, Indiana, at 1st Source Investment Advisors, said in a phone interview. His firm owns both Apple and Exxon shares. “People are coming to the realization that Apple is losing a little bit of floss and shine.”
About $US245 billion has been erased from Apple’s value since the Cupertino, California-based company rose to an all-time high in September. Even as Chief Executive Officer Tim Cook guided Apple to record iPad and iPhone sales, investors worry about management’s ability to keep producing hit products more than a year after the death of co-founder Steve Jobs.
Samsung Electronics and others have followed Apple’s lead into the era of mobile touch-screen devices and are grabbing market share by introducing smartphones in various designs and prices. In the tablet market, Apple’s dominance is threatened by rivals such as Google Inc., which made its first foray with its Nexus 7 device.
Apple sank 12 per cent yesterday after posting the slowest quarterly profit growth since 2003. Earnings will continue to worsen in the current quarter, with analysts projecting a 14 per cent drop, according to estimates compiled by Bloomberg.
“There was little room for imperfection,” Mark Moskowitz, an analyst at JPMorgan Chase & Co. in San Francisco, said in a phone interview. “Investors jumped into the parade alongside growth in tech. They forgot that Apple is taking on a herculean effort.”
Exxon Mobil regained its No. 1 rank, which the Irving, Texas-based company had kept in four out of the six years through 2011, data compiled by Bloomberg show. The stock is up almost 6 per cent this year as profit is forecast to rebound from three quarters of declines.
The energy producer may say on Feb. 1 that fourth-quarter earnings increased 2 per cent, analyst estimates compiled by Bloomberg show, as Chief Executive Officer Rex Tillerson stepped up acquisitions and capital spending to reverse the longest stretch of quarterly production slides in 13 years.
“We’re getting closer to maybe an inflection point as we enter 2014, where that growth could improve,” Brian Youngberg, an analyst with Edward Jones & Co. in St. Louis, said in a telephone interview. “Investors pick up on that ahead of time.”
Apple may reclaim its top spot if analysts’ price estimates come true.
Shares of Apple will climb to $US627.79 over the next 12 months, implying a market value of about $US589.5 billion, according to analyst projections compiled by Bloomberg. At the same time, Exxon Mobil’s market value will reach $US434 billion, based on the average share-price forecast of $US95.17.
Investors are now willing to pay more for Exxon Mobil’s earnings, driving its valuation premium over Apple’s to levels not seen in 12 years. The energy producer is trading at 11.6 times reported income, compared with Apple’s multiple of less than 10, data compiled by Bloomberg. The gap was biggest since December 2000.
“Apple is cheap, nobody disputes that, but somehow all the good facts are interpreted through a different lens now than they were six months ago,” Daniel Arbess, who runs Perella Weinberg Partners LP’s Xerion hedge fund, said in a Bloomberg Television interview on “Surveillance” with Tom Keene. “Apple is a perfect allegory for what investment sentiment is all about in this world.”